SUBMITTED BY: PARISHMITA SAIKIA, MA SOCIOLOGY (THIRD

SEM)
Roll No: SOS15004
Tezpur University

RELATIONSHIP BETWEEN
SOCIAL STRUCTURE AND
ECONOMY
Paper: Economic Sociology

Relationship between Economy

and Social Structure

There are certain linkages between economy and social structure that
poses one of the greatest challenges to social science. Many sociologists
have tried to explore this relationship between economy and social
structure.

In Marxist theory, human society consists of two parts: the base and the
superstructure. The base comprises the forces and relations of
production and the superstructure of a society include its culture,
institutions, and political power structure, roles, rituals and the State.
According to this theory, base determines the superstructure and the
superstructure influences the base however, the influence of the base
predominates.

Men enter into definite relations that are

indispensable

and

independent

of

their

will, relations of production which correspond to a

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definite

stage

of

development

of

their

material productive forces. The sum total of these

relations of production constitutes the economic
structure of society, the real foundation, on which
rises a legal and political superstructure and to
which

correspond

definite

forms

of

social

consciousness.

Thus, the founding fathers of sociology, Karl Marx, Max Weber and
Emile Durkheim, has to some extent studied the relationship between
economy and social structure. However, according to Tony Lawson, it is
the nature of this relationship which is highly controversial.
The assignment is to understand this complex relationship between
economy and social structure on the basis of the article, The Impact of
Social Structure on Economic Outcomes by Mark Granovetter.
Social structure consists of social institutions and social networks.
According to Granovetter, social network affects the economy for three
main reasons:
1> Flow of information: Social networks affect the flow and quality of
information. As information is nuanced and difficult to verify,
actors tend to rely on social networks.

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2>Rewards and Punishments: Social networks are an important

source of reward and punishment, as there are certain repetitive
behaviours, norms and values that constitutes these networks, any
deviance from it leads to punishments.
3>Trust: Within the context of a social network, there is confidence of
the one on the other. Information is difficult to verify, thus, the
actors tend to trust those with whom they have ties.
In this article, Mark Granovetter discusses the core principles of social
networks and economic outcomes:
1. Norms and Network Density: Within a social network, norms
shared ideas about proper way of behaviour are clearer, firmly
held and easier to enforce. People sharing strong ties internalize
the norms and emphasize on trust. They encounter ideas of proper
behaviour repeatedly, which are discussed and fixed and any
deviance from these norms are difficult to hide and more likely to
be punished.
For instance, in the case of the caste system, each member of a
particular caste group is socialized from early age on the way of its
behaviour. Any deviance from it, suppose in the case of efforts of
the caste group for upward mobility through the process of
sanskritization, to attain a higher position in the hierarchy will be
faced by ostracization and exclusion from the village, non3 | Page

recognition of their new social status or occupation, demanding of

fines, or other punishments which may even turn fatal.
2. The Strength of Weak Ties: Interesting, new, unique information
flows to individual through weak ties. This is because actors within
a strong tie tend to move in the same circle, thus, the information
overlaps considerably with what is already known.

Fig: 1
Flow of information within a Strong Tie

Fig: 2
Flow of information between Weak Ties

To render services, to achieve scarce resources, to do job or

business acquaintances are important as information is provided
by these weak ties who move in different circles. These weak ties
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can connect us to a wider world; better sources to go beyond the

confines of a group or community.
Mark Granovetter terms this as the strength of weak ties
which determine the extent of information diffusion in large scale
social structures. According to Granovetter, new ideas and
information are efficiently diffused through weak ties, that these
ties play the role of transmitting unique and non-redundant
information across largely disconnected segments of
social networks.
Let us take the case of the Hundi system, where credit and trade
transactions took place; here, we can see the importance of weak
ties, allowing an individual to borrow money to start businesses in
a foreign land, for instance.
3. The importance of Structural Holes: The concept of Structural
Holes was developed by Ronald Stuart Burt. According to
him, most social structures has strong ties of dense clusters where
homogeneous ideas, information and behaviour exists. An
individual who acts as a mediator between two or more closely
connected groups of people gain important information and other
advantages.
As a result of the hole or gap between two contacts, the third party
act as a bridge and benefits from such network.

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A
A tends to get
the
novel
information.

Fig: 3
Structural Hole
For instance, a companys access to connections or position in a network
determines the quality of information it receives. Two companies, if
suppose shares a common board member, information about each
companys market environment can be accessed by the Director.

4. The interpretation of Economic and Non- Economic action: Along

with economic, social life also involves non-economic forces.
Therefore, when economic and non-economic activities intermix,
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non-economic activities affects the costs and the available

techniques for economic activity. This intermixing is termed as
Social Embeddedness of the economy.
It refers to the mixing of the two activities of social life to the
extent to which economic action is linked to or depends on actions
or institutions that are non economical like social networks,
culture, politics, and religion.
Let us take the example of pilgrimage economy which flourishes
due to religious festivals, rituals, or mandatory visits to the pilgrim
sites.
Here, religious beliefs are non economic motivations which leads
to economic gains as a by-product.

Let us now focus on the impact of social structure on a series of

important economic outcomes, as discussed by Granovetter.

Social Structure and Labor Markets

Economy is not independent of social factors. Strong and weak ties
plays a role in the economy.
Social networks play a key role in the process of recruitment in
labor market where employers and employees prefer to learn about
the other through social capital that people maintain in large part
for non economic reasons.
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Two important aspects of the social networks are that- first, these
networks are already created; actors need not invest in
constructing them and thus, the cost is less than that of more
formal search intermediaries. Second, pre existing networks are
unevenly distributed across individuals, therefore, it creates an
uneven playing field in the labor market, even without the
intention of the actors to do so.
Actors tend to find jobs through personal contacts without
spending resources for job search. The irregular field can be
explained by an example. In most cases, the Brahmins, upper caste
of the Hindu society, had access to various social capital and
resources and thus, with the advent of the colonial rule in India,
they were the first to access Western education and acquire jobs as
subordinate officials under the British.
Again, according to Granovetter, the resources held by individuals
networks, the intentions of employers and macroeconomics
conditions are only three of the important sources of variations in
outcomes when networks route people to jobs.
Social Structure and Prices
Actors in transaction process are aware of the impact of social
capitals on the price of a commodity, with varies according to the
nature of their relationship, the cost of shifting to different
partners and the market situation.
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Many studies have shown that it is typical to trade only with

designated others, in part for protection in distant settings.
Revision of market relations, shift of trading partners, breaking of
old ties are difficult under different circumstances and depends
largely on the economic and non economic costs of severing such
long time ties as well as the availability of social alternatives.
Thus, it shows how economic flexibility is dependent on social
structure of the trade relation.
Clientelization that is, dealing exclusively with known buyers and
sellers is seen as a business strategy of many companies like the
Chicago firm, where the personal contacts to bankers pay lower
interest on loans and the bank cultivates such contacts. Similar
study of French banks shows that prices are lower for corporate
clients with continuing ties with the law firms because of the trust
developed over time, and norms of reciprocity, allow the firm and
its client to reach agreement on various issues.
Moreover, the significance of this relation between the buyer and
seller can also be elaborated through the 1996 General Social
Survey which shows that goods where assessment is difficult, like
in the case of used cars, legal advice, home repairs etc. in the
United States are made through personal contacts.
The situation of social and economic forces feeding into one
another can be explained through Bakers idea that greater price

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volatility presents more opportunities for trading profits, attracting

more traders but prices became more volatile with increase of
traders with limited social control and networks based on trust.
This communication problem and proliferation of cliques resulted
in additional overall volatility.

Social structure, Productivity and Compliance

There are certain relations between the social structure and
economic outcomes in relations to state or quality of the efficiency
of production. It is important to note that,
o Tasks cannot be accomplished without serious cooperation
from others,
o complex tasks requires interactions with knowledgeable
ones,
o group norms and cultures shape skill and productivity which
requires certain level of cohesion and consensus, and that
o Loyalty is important to production.

An example of the last point can be the Loyalty System in firms that
can be built on commitment to a profession. The system is an attempt to
elicit cooperation from workers not only from incentives but also
deriving from identification with the firm or with some set of individuals
that encourages high standards and productivity. Professional ethics and

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monitoring provide some guarantee that a professional employee will

perform reliably.

Loyalty system benefits from the intense socialization, prior screening

of their members, membership in groups outside the firm that guarantee
and monitor the workers behaviour, and the extensive off the job
social relations. Thus, employers have considerable incentives to
homogenize new members of the loyalty system and to recruit them
within the same existing social networks.
Such systems of loyalty and compliance is evident in Webers work on
civil administration where he notes the importance of such systems by
citizens to consider orders from civil administration as legitimate, which
is similar in the case of Loyalty systems.
Again, we can also explain the persistence of large family and ethically
oriented business groups in advanced economies through the systems of
loyalty and compliance. In the case of the large joint family, it can be
suggested that to prevent land or other properties from being split and to
ensure higher yield and production as well as income, the joint family is
still maintained, where rivalry among family members is curbed and a
sense of obedience and loyalty prevails.

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 Social Structure and Innovation

Many studies have shown the impact of social networks on the
extent and source of innovation.
Zelizers study of pamphlets, diaries and other documentary
evidences to understand the normative changes that transformed
insurance from profane gambling to sacred obligation further
elaborates the above point.
It was noted that in the 1970s, financial derivatives were
unimportant but the insurance industry a gambling business
used religious language and secured the support of the clergy,
where they stressed on the necessity of providing for family after
death, which made it a sacred duty and gave it a symbolic
significance and obligation.
Thus, looking through the various principles and arguments
provided by Granovetter, it has been established that there is a
significant impact of the social structure on the economic outcome
whether it be in the case of persistence of large family and ethically
oriented business groups in advanced economies, or choice of
alliance partners, decisions to acquire other firms and strategies
used to do so among others. The article discusses the various ways
in which social phenomena strongly affect costs and available

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techniques for economic action and the economy also has an

impact on the social structure.
Through this article, Granovetter tried to suggest some linkages
which have largely remained unexplored and pose one of the
greatest intellectual challenges to the social sciences.
At last I would like to add that, human actors are governed by
social structure and it is through human actions that social
structure arise at all, reproduced and transformed over time.

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